April 7, 2011
Santiago, Chile
General Tommy Franks, the rather straight-talking former commander of the war in Afghanistan way back in 2001, once described US defense policy wonk Doug Feith as “the dumbest fucking guy on the planet.”
Feith, a bumbling architect of the failed Bush Doctrine, now has an intellectual match in Christina Romer, the former Chairwoman of Barack Obama’s Council of Economic Advisors.
Romer appeared Thursday on the Daily Ticker, leaving no doubt that she should be the undisputed frontrunner for the Nobel Committee’s much anticipated Doublethink Prize. Warning, do not watch this video while eating: food projectile WILL permanently damage your computer.
Romer begins her remarks to the interviewer Aaron Task: “There are tools that we can use, and I think it’s shameful that we’re not using them.” Trillions of dollars of government spending, debt monetization, and money creation isn’t enough. Romer wants us digging ditches with teaspoons.
“If I have a complaint about policy, it’s that we’re not doing enough.” Clearly, from the bank bailouts, to the systematic dismantling of GM in favor of the union, to programs that incentivize home and auto purchases, to stamping out all means of financial privacy, to trillion dollar deficit spending, the government isn’t involved enough.
Romer goes on to say that the Federal Reserve’s plans to end the second round of quantitative easing (QE2) in June “is a mistake. The evidence is that it’s been very effective, and certainly QE1 was very effective. I don’t understand why we’d be dialing back that tool because I think it is certainly very helpful.”
$1.5 trillion dollars later and what do we have to show? 50,000 minimum wage workers flipping Big Macs. I’m lovin’ it.
Next, Romer explains that “[quantitative easing] tends to lower long-term interest rates, it tends to lower the price of the dollar… both of those things are good for ordinary families.”
So, completely screwing the people who have worked hard and are trying to save their money with sub-par interest rates that don’t keep up with inflation is good for America. Paying more for food, fuel, healthcare, insurance, state and local taxes, airfare, rent, building materials, household chemicals, etc. is good for America.
(Yes Mr. William Dudley, the iPad 2 is as cheap as its predecessor– but bear in mind that the iTunes music store is slowly, surreptitiously raising its prices from 99 cents to $1.29… so the Apple deflation argument is lost on me.)
Romer continues. “[Low interest rates] mean that it’s easier for consumers to afford borrowing.”
Precisely, that’s what American households need– more debt. I can’t seem to recall a single instance in US history when consumers taking on increasing levels of debt posed any danger to the economy.
Romer continues. “A lower price of the dollar tends to make our goods more competitive in foreign markets.”
This is one of the biggest logical fallacies in politics– that a weak currency is good for an economy because it promotes exports. Right, because so much of the US economy is based on manufacturing. Nevermind that a weak currency imports higher input costs in the form of higher energy prices, raw materials, and component parts from overseas.
A bewildered Aaron Task, now looking around for Ashton Kutcher to appear out of nowhere, asks “… but isn’t it true that long-term rates have risen since the Fed announced QE2 in August… and also… a lot of Americans probably feel that a weaker dollar is hurting them, not helping them…?”
Despite having just claimed that quantitative easing was successful in keeping long-term interest rates low, Romer now says that “it’s hard to evaluate what QE has done to long-term interest rates… because there are lots of announcement effects.”
Apparently fluctuations in long-term interest rates based on announcements or expectations of quantitative easing in fact have nothing to do with quantitative easing. They’re due to the weather.
“What I can tell you,” she says, “is the academic studies that have looked at this absolutely say that QE does what we thought it was going to do.”
The smoking gun! Academic studies validate QE, brought to you by the same folks who said that applying modern portfolio theory to a mega-pool of liar loans would result in superior risk-adjusted returns. The same folks who measure risk in sigma, who completely missed the boat on the crisis to begin with… all declare QE a success.
Romer continues. “Everyone agrees that a lower price of the dollar… certainly tends to raise GDP.”
Yes, everyone agrees. Absolutely everyone in that little ivory tower where Christina Romer lives with her funny mirrors and Paul Krugman. Breaking windows is also good for GDP, as are natural disasters, nuclear meltdowns, and civil wars fought by 13-year old soldiers with AK-47s. Hooray Japan! Hooray Africa!
The truth is that a weak currency debases the standard of living. But that doesn’t seem to matter to Romer:
“And… on the price of the dollar, we’re not talking about what’s happening to your purchasing power here…”
Right, because purchasing power is completely irrelevant. The US government should continue conjuring money out of thin air, indebting future generations, and recklessly spending on programs and initiatives that simply don’t work because it’s good for nominal GDP, irrespective of the damage it does to household living standards.
“Nothing says that you have to cut spending this year,” Romer explains. “You can do a fiscal expansion this year but have it be part of a package that ultimately gets the budget deficit down.” And continues to kick the can down the road for other generations to deal with.
Romer typifies the mindset of the people making decisions in government, and the sort of advisors in President Obama’s circle. The US government is going on three years of massive, unprecedented fiscal and monetary expansion. Yet it hasn’t made a dent in unemployment, and prices are rising.
At this point, even Doug Feith would look at the situation and say, “maybe we should reconsider our strategy.” Romer, however, delivers her lines with the demeanor of a concerned grandmother, and I can imagine the north/south nods of many viewers who unquestionably absorb the doublethink based solely on her delivery.
It reminds me of one of the best quotes from George Orwell’s 1984:
“In a way, the world-view of the Party imposed itself most successfully on people incapable of understanding it. They could be made to accept the most flagrant violations of reality, because they never fully grasped the enormity of what was demanded of them, and were not sufficiently interested in public events to notice what was happening. By lack of understanding they remained sane. They simply swallowed everything. . .”
Big Brother is watching you.
